Sainsbury's steps up sales growth

Click to follow
The Independent Online

A drive for more non-food business paid off for Sainsbury's today after it reported accelerated sales growth of 2.9% in its second quarter.

The UK's third biggest grocery chain saw like-for-like sales excluding petrol but including VAT in the 16 weeks to October 2 increase from 1.1% in the previous quarter.

The group said non-food - identified as a key area for the supermarket, which includes electrical goods, homeware and clothing - was growing at three times the rate of food.

Sainsbury said it was outperforming the market, a day after rival Tesco, the UK's number one supermarket, posted a gain in UK like-for-like sales of 1.3% quarter-on-quarter.

Sainsbury's said excluding fuel, total sales were up 5.2%, compared to 4.4% last quarter, but warned rising fuel prices were putting pressure on household budgets.

Chief executive Justin King said its Tu clothing range was "leading the charge" in non-food sales, while online sales were up 25% and "progressing well".

Mr King said expansion plans were paying off with new space contributing a further 2.3% to sales growth, excluding fuel.

The group, with 537 supermarkets and 335 convenience stores, remains on track to open 1.45 million square feet in new space during the current financial year as competition for hard-pressed shoppers intensifies.

Sainsbury's opened seven supermarkets, including its largest stores in England, Scotland and Wales, 12 convenience stores and completed seven extensions in the period, adding 460,000 sq ft of space.

The supermarket said its convenience business - another area marked as key for growth - was now generating £1 billion in annual sales.

Mr King said the customer response to the relaunch of the group's Taste the Difference range last month had been "fantastic".

The multi-million pound overhaul saw the upmarket range expanded by 150 lines to 1,141 products. Mr King said slow-cooked lamb shanks and roasted pork belly were highlighted as early favourites.

He said the supermarket expected the "consumer environment to remain challenging" but added Sainsbury's was "well placed to make continued good progress".

The supermarket's resurgent performance in recent months has seen its market share rise to 16% from 15.8% a year earlier, according to Kantar Worldpanel figures. It is forecast to turn in a full-year profit of £655 million, up from £610 million last year.

The trading update comes in the middle of an important week for gauging the mood of the British consumer, following Tesco's half-year results yesterday, and ahead of an update from high street retailer Marks & Spencer tomorrow.

Sam Hart, retail analyst at broker Charles Stanley, said the supermarket was expected to turn in a full year profit of £660 million.

Mr Hart said: "We retain a positive long-term view on Sainsbury and expect it to deliver at least high single-digit growth in earnings and dividends in each of the next three years."